Home builders will be a casualty of rising rates [TOL]

I know I just got finished writing a post warning to be careful of claiming correlation as an investment thesis / market timing guide.  In other words, if interest rates do this, the dollar will do that or in this case drawing correlations between interest rates and the fate of home builders.  Sometimes the correlations pan out and sometimes they don't so the wave count is always the most trusted and therefore primary market timing indicator.  But when you have a logical correlation AND a wave count to go by then I think the wind is at your back.  Not to mention a weakening economy, stubbornly high unemployment numbers that even conservative people say the government is lying about, and high debt levels across the board.

So this is my first post on Toll brothers (ticker:TOL) which is a high end home builder. Long time readers know that I rarely if ever even mention home builders in my posts.  I don't know the fundamentals of TOL and I really don't care because I have provided what I consider to be strong evidence on this blog over the years that so called fundamentals are unknown and in fact unknowable.  Anything I write here is simply based on the wave count.

And right now it seems clear that we are at or very near a peak in the price of TOL shares.  We got 5 rail bumps on the rising wedge, each wave being broken down into a-b-c.  We got a throwover on the E wave and then broke back down hard into the channel.  It is possible that it has one more back test of the upper rail from below.  In fact, it can even break out to perhaps $37 or so and then fall back in but within 2 trading weeks from today my model says it will be trading significantly lower.  We should know tomorrow whether it is going to break down or whether it has a bit more upside but the chart will very likely fall below the lower rail significantly the next time the selling starts.
 
I don't think TOL will be falling alone and so it could pay off nicely to short the weaker players first.  For example, KBH is trading at $13.11 today, looks like the peak of a 4th wave to me.  Next stop: $10 before March.  That's some pretty quick coin for a simple short.  Of course, use stops just above your buy price, blah blah blah.  By now I expect that long time readers know the game and are getting pretty good and pretty disciplined about using stops.  At least I hope so.  This is a game of odds and not certainties.

The coming collapse for home builders will be one for the history books.  TOL could easily be sub $5 by end of 2017.   Nobody thinks that is possible today except people who can read an EW chart.

BTW home builders will be falling because home prices will be falling.  When banks can't lend and when people don't want to borrow $500 or $600k for a freaking roof over their head then home prices are going to fall and fall hard.  All these shitting shoe box 1200 sq CA and NY crap boxes are going to plummet from $1 million current price to their real value of sub $150k and the banks that loaned that money out are going to get stiffed. Many will BK as a result.